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THE Singapore dollar (SGD) has stabilised somewhat, recovering from the year's low reached on Tuesday, and with that short-term interest rates have also eased.

On Thursday, the SGD rallied to S$1.4155 against the US dollar (USD), off the Tuesday low of S$1.4297 in highly volatile trade along with other Asian currencies, as China worries continue to give markets the willies.

The three-month swap offer rate (SOR) also eased to 1.46209 per cent on Wednesday, off Tuesday's high of 1.56409 per cent. The SOR is used to price commercial loans.

"This is going to be a painful and treacherous process," Mr Li said in a speech to a World Economic Forum meeting in the north-eastern city of Dalian.

"So ups and downs in economic performance are hardly avoidable," he added, calling that "natural" during a time of change, reported Reuters.

"China is not a source of risk for the world economy but a source of strength for global growth," Mr Li said, stressing that it accounted for about 30 per cent of world economic expansion in the first half of this year.

"The pullback in SOR can be attributed to a slight strengthening of the SGD," said Mr Leow.

Further downside to the SOR can be achieved in the short term if USD/SGD consolidates further, he said. But for the longer term, SOR rates will likely still take direction from where USD rates head towards, he added.

The markets also cannot decide when the Fed will begin hiking interest rates. Some think it could be next week at a scheduled meting, others say global uncertainties will push the event to December.

Commerzbank technical analyst Axel Rudolp said the SGD is expected to stabilise around the S$1.4170 region but if "it breaches S$1.4297, the next high is S$1.45 . . . perhaps by the end of the year . . . (in the) short term it should stabilise, though".

Year-to-date, the SGD has fallen some 7 per cent against the greenback, making it the fifth worst Asian currency performer.

The worst is the Malaysian ringgit, down 23 per cent, followed by the Indonesian rupiah, 16.4 per cent, Thai baht, 9.9 per cent and Korean won at 8.4 per cent.